Saying the interest rate on late property taxes is so high that residents can’t catch up, the Schenectady City Council is considering giving them a break.
Those who are late currently pay 21 percent interest, but cities like Albany and Saratoga Springs charge just 15 percent, Councilwoman Leesa Perazzo said.
“There’s a tremendous difference in what our neighbors are doing,” she said, suggesting a rate similiar to those.
She originally asked for a two-tiered system, in which owner-occupants would have a much lower interest rate than the rest of city property owners, but Deputy Corporation Counsel Carl Falotico said the city would need special permission from the state for such a change.
No other municipality in the state has a two-tiered interest rate, he said, adding that Amsterdam got temporary permission for a rate that distinguished between vacant and developed properties in the 1990s. That permission expired in 2000, he said.
But reducing the rate, even to 15 percent, may not resolve the council’s concern: Some homeowners hit a financial crisis and never catch up. The council has received many letters, emails and personal requests over the years from residents who described yearlong crises, such as a disabling heart attack, a layoff or the death of a spouse. By the time the owner recovered financially, the tax bill for that lost year had often doubled.
Perazzo cited one woman who now pays $9,000 every year on a $5,000 bill because she cannot catch up from the year she missed. The year after that, she paid off the old bill, including the interest, but she could not also afford to pay the current year’s taxes, so at the end of the year, she was still a year behind. Several years later, she is still in the same situation.
“They can’t catch up,” Perazzo said. “This woman has lived in her home 43 years. She’s been paying faithfully. … I think it’s time to take some action, especially for the people who have been willing to pay double their taxes.”
Councilman Vince Riggi strongly supported her.
“We’re all hearing from good homeowners who had a hard time for a year or two,” he said. “I think we have to do something. If people can’t pay it, we foreclose on the house. And who will replace them? And if we don’t replace them, what’s going to happen to that home?”
Since the two-tiered system seems unlikely, Perazzo proposed offering a payment plan. The council has the authority to waive interest and penalties on property taxes, and could do so in cases that met certain conditions.
“It would have to hinge on people making payments in good faith,” Perazzo said, adding that it would be only for owner-occupants.
She suggested the plan be offered only to those who had missed two years of taxes or less, had paid their taxes regularly before and after the crisis and agreed to pay off the debt in a specific period of time. If they missed even one payment, she said, the plan would be canceled.
The goal would be for residents to pay off the debt while simultaneously paying their current taxes, Perazzo said.
Council members supported the idea but did not immediately decide how much interest would be waived for those offered the payment plan.
Falotico said he will present options at the next committee meeting on Sept. 15.
“I can look into the different ways, get creative,” he said.